FDI in Retail

By Sahil Goyal
 History of FDI

• FDI in India can be traced back with the

establishment of East India Company. Before
independence major amount of FDI came from the
British companies. British companies setup their units
in mining sector and in those sectors that suits their
own economic and business interest.
• Keeping in mind the national interests the policy
makers designed the FDI policy which aims FDI as a
medium for acquiring advanced technology and to
mobilize foreign exchange resources. 
 Meaning of FDI
• An investment made by a company or entity based in
one country, into a company or entity based in another
country. Entities making direct investments typically
have a significant degree of influence and control over
the company into which the investment is made. 
• According to Department of Industrial Policy and
Promotion (DIPP), the total FDI investments in India
April-June 2018 stood at US$ 12.75 billion, indicating
that government's effort to improve ease of doing
business and relaxation in FDI norms is yielding results.
 Recent Findings
• Some of the recent significant FDI announcements are as follows:
• In 2018, Bharti Airtel received approval of the Government of India
for sale of 20 per cent stake in its DTH arm to an America based
private equity firm, Warburg Pincus, for around $350 million.
• In 2018, Idea’s appeal for 100 per cent FDI was approved by
Department of Telecommunication (DoT) followed by its Indian
merger with Vodafone making Vodafone Idea the largest telecom
operator in India
• In 2018, Walmart acquired a 77 per cent stake in Flipkart for a
consideration of US$ 16 billion.
• In 2018, Ikea announced its plans to invest up to Rs 4,000 crore
(US$ 612 million) in the state of Maharashtra to set up multi-format
stores and experience centres.
 Limitations

• Entry of global giants will force the Indian Traditional

Kiryana Stores to shut down their business.
• Profit will be distributed, investment ratios are not fixed.
• An economically backward class person will suffer from
price rise.
• There will be cross-culture conflicts
• Exploitation of natural resources by foreign players
• dia will become slave due to entry of foreign players
 Strenghts

• FDI shifts the burden of risk if an investment from domestic to

foreign investors.
• Repayments are linked to profitability of the underlying investment
• FDI is the only capital inflow that has been strongly associated with
higher GDP growth since 1970.
• 4. FDI contributes to economic growth as it raises the ratio of FDI
flow to domestic investment.
• 5. FDI has led to potential gains through technology transfer.
• FDI has generated large employment opportunities in a number of
countries.
• FDI has led to the growth of the international trade.
 Conclusion
•It can be said that the advantages of allowing unrestrained FDI in the retail
sector evidently outweigh the disadvantages attached to it and the same can
be deduced from the examples of successful experiments in countries like
Thailand and China where too the issue of allowing FDI in the retail sector
was first met with incessant protests, but later turned out to be one of the
most promising political and economic decisions of their governments and
led not only to the commendable rise in the level of employment but also led
to the enormous development of their country’s GDP.
•And also, nobody can force a consumer to visit a mega shopping complex or
a small retailer/sabji mandi. Consumers will shop in accordance with their
utmost convenience, where ever they get the lowest price, max variety, and a
good consumer experience.